Nov 10 (Reuters) - It was the break-up that eluded a
generation of General Electric Co insiders.
When Larry Culp, the first GE chief executive not to rise
from within its ranks, convened a board meeting earlier this
month to greenlight the split of the industrial conglomerate
into three companies, he secured its backing.
It was a far cry from board meetings held in the 1980s and
1990s by one of Culp's predecessors, Jack Welch. The iconic
entrepreneur got the GE board to back his moves in the opposite
direction, getting GE into businesses as diverse as mortgages,
credit cards and television entertainment and prompting the
Federal Reserve to characterize the company as too big to fail.
Welch's successors, Jeff Immelt and John Flannery, gradually
sold of many of GE's businesses to boost the company's ailing
share price in the two decades that followed.
But it was Culp who managed to push through the ultimate
untangling of GE, with a plan to break it up into three
companies to house its healthcare, aviation and power businesses
Culp, 58, became GE's CEO in October 2018 after joining it
as a board director six months earlier. Culp started informally
discussing the idea of a break-up with advisors earlier this
year, according to a person familiar with the matter, but
discussions with GE's board started to formally intensify in the
spring as the plan he put together took shape.
"With the progress on the deleveraging, the progress with
our operational transformation, the pandemic lifting ... there's
no reason to wait a day," Culp told Reuters in an interview.
"It's the right thing to do."
The idea to spin off healthcare was not new - Flannery had
floated it publicly in 2018, but never got to see it through.
Financial woes at GE's power business escalated into a crisis
that caused the company to miss many profit targets and cost
Flannery his job.
In the weeks that followed his appointment, Culp, a former
CEO of industrial conglomerate Danaher Corp, undertook a
top-to-bottom review of GE's sprawling businesses and numerous
profit-and-loss lines, people familiar with the matter said.
Analysts and investors lauded him for improving GE's
Culp decided at the time that the healthcare business, a
pre-eminent supplier of medical equipment and instrumentation,
was too important of a cash cow, while GE's other two businesses
were still not self-sufficient for the break-up to happen, one
of the sources said.
A GE spokeswoman declined to comment on the discussions
between Culp and GE's board.
READY FOR BREAK-UP
Still, Culp wanted to pursue the idea, and pruned GE through
other deals in the mean time. These included a $30 billion
merger of GE's jet-leasing unit with Ireland's AerCap, and the
$21-billion sale of the biopharma business to Danaher.
Now, GE's troubled power business is finally turning a
profit. The company's renewable energy business has also been
able to improve its cost structure and be in a position to
capitalize on the transition to a low-carbon economy.
"We can spin healthcare, we can do that first. That business
is clearly performing well. We have some preparations on the
shelf from the IPO a few years ago," Culp told
"We've talked about some of the work we still need to do in
renewables ... but we'll really be ready for this next step in
Hedge fund Trian Fund Management, an ally of Culp on GE's
board, lauded the latest moves, stating it "enthusiastically
supports this important step in the transformation of GE."
To be sure, Culp's tenure at GE has not been without
Earlier this year, GE shareholders rejected a payout for
Culp of as much as $230 million in a non-binding vote.
Proxy advisory firms Institutional Shareholder Services Inc
and Glass Lewis, which opposed the pay packages, argued that GE
had lowered the bar on Culp's performance targets during the
COVID-19 pandemic and that his stock award was too generous.
GE countered that the payout was necessary to incentivise
(Reporting by Anirban Sen in Bengaluru and Rajesh Kumar Singh
in Chicago; Editing by Greg Roumeliotis, Kenneth Maxwell and